Strong economy pushes up state tax receipts 10 percent

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WASHINGTON (AP) – State tax receipts jumped nearly 10 percent last year as a strong national economy increased individual earnings and corporate profits.

Most states showed increases without raising tax rates, meaning the gains were caused primarily by an expanding economy, said Corina Eckl, fiscal program director for the National Conference of State Legislatures.

“It’s absolutely attributable to an improving national economy,” Eckl said. “Very few, very modest tax changes happened last year.”

Nationally, states collected a total of $649 billion in taxes in the 2005 budget year, which ended in June for most states, according to a report Thursday by the Census Bureau.

That’s $2,192 per person.

The numbers include only taxes collected by states. They do not include federal or local taxes, which can greatly increase a person’s taxes.

California collected the most money, more than $98 billion.

Vermont collected the most per person, $3,600.

South Dakota collected the least overall, at a little more than $1 billion, and the least per person, $1,430.

In northern New England, collections grew from $1.77 billion to $2.4 billion in Vermont; $2.87 billion to $3.1 billion in Maine; and $2 billion to $2.2 billion in New Hampshire.

New Hampshire had the region’s lowest taxes per person at $1,544, followed by Maine at $2,323. Vermont’s per-capita taxes of $3,600 topped Massachusetts and Connecticut, which were $2,815 and $3,300 respectfully.

Overall, states get nearly half their tax revenue from sales taxes, which went up 6 percent from 2004 to 2005. Individual income taxes increased by nearly 13 percent, and corporate income taxes shot up 28 percent. However, corporate taxes account for little state revenue, about 6 percent, nationally.

“Individual income taxes are the big driver,” said Chris Edwards, director of tax policy at the Cato Institute, a Washington think tank.

“The stock market is up and people are earning more money.”

Eckl said states also were helped by a two-year, $20 billion package of federal aid to states approved in 2003. The money helped states overcome budget shortfalls stemming from the economic downturn earlier in the decade, she said.

Eckl said most state budgets have recovered after several years of budget shortfalls. States across the country had to cut programs, increase tax rates and scramble for quick budget fixes after the national economy slumped earlier in the decade.

Today, many states are expanding programs, putting money away for later or considering tax cuts, Eckl said.

Every state but Vermont has a constitutional requirement to balance its budget, which leads many states to save money as insurance against future downturns.

All states collected more taxes in 2005 than they did in 2004. And every state but one collected more per person. The remaining state, New Hampshire, collected the same both years, $1,544.

Nationally, changes in state tax laws accounted for less than 1 percent of increased tax revenue, said Bert Waisanen, a fiscal analyst at the National Conference of State Legislatures.



On the Net:

Census Bureau, state tax collections: http://www.census.gov/govs/www/statetax.html

AP-ES-03-31-06 1308EST

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